Swift, Andrew W.
Harry Markowitz pioneered Modern Portfolio Theory which suggested that portfolio risk should be quantified by variance. The required elements for this theory are the mean vector for stock returns and the covariance matrix to evaluate risk. Two tests were run on the three methods for estimating the covariance matrix: Sample covariance, single-index, and shrinkage. The shrinkage method performed the best in the Simulated Data test, while the single-index method performed the best in the Moving Window Minimum Variance test.
Worcester Polytechnic Institute
Major Qualifying Project
Access to this report is limited to members of the WPI community. Please contact a project advisor or their department to request access
Restricted-WPI community only